Question: Ryan is debating whether to continue making 2,000 units of product A or to outsource the manufacture of this product. The total cost (variable and

Ryan is debating whether to continue making 2,000 units of product A or to outsource the manufacture of this product. The total cost (variable and fixed) to Ryan to make Product A is $16 a unit. Ryan can buy Product A from the outside for $15 a unit. If product A is outsourced, fixed costs of $8,000 attributable to this product will be reduced by 25%.

If the product is outsourced, Ryan will

		lose $4,000.
		lose $2,000.
		gain $2,000.
		gain $4,000.

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